Updated September 2026 · ₹25 lakh tax-free limit
Leave Encashment Calculator for Payout & Tax Exemption
Find out how much your unused earned leave is worth and how much of it is tax-free. This leave encashment calculator applies the full four-part Section 10(10AA) test with the ₹25 lakh limit, then estimates the tax on the rest.
- Full four-limit tax test
- Private and government
- 30 or 26-day divisor
- Tax on the taxable part
- ₹25 lakhLifetime tax-free limit for private employees
- 30 daysLeave per year of service counted for tax
- 10 monthsAverage salary cap on the exemption
- BothOld and new tax regime get the exemption
Beyond the basic formula
Why this leave encashment calculator is more accurate
Most calculators multiply your daily salary by leave days and apply the ₹25 lakh cap. The real tax-free amount is often much lower, because of the other three limits.
All four limits, side by side
See every Section 10(10AA) limit and which one sets your tax-free amount, instead of just the ₹25 lakh cap.
30-days-a-year rule
Tax law counts at most 30 days of leave for each year worked, minus leave taken. We apply it for you.
Every situation
Private or government, at exit, during service, or paid to family after death. Each follows its own tax rule.
Lifetime limit tracking
Enter exemption claimed at earlier jobs and we reduce the ₹25 lakh limit, as the rules require.
Tax and take-home
See the estimated tax on the taxable part and what you actually keep, at your own slab rate.
Your employer’s method
Switch between the 30-day and 26-day divisor so the payout matches your company’s leave policy.
Takes a minute
How to use the leave encashment calculator
Five steps to your payout and tax-free amount.
Choose employee type and timing
Pick private or government, and whether you are leaving, still working, or claiming on behalf of a family member.
Enter Basic + DA and leave days
Use your last drawn monthly Basic plus Dearness Allowance and the earned leave balance to be paid out.
Match your employer’s divisor
Most employers divide by 30. Some divide by 26. Your HR policy or payslip will say.
Add service and leave history
Enter completed years, leave credited each year, leave already taken and any exemption claimed before.
Read your result
See the payout, the tax-free and taxable parts, which limit applies, and the tax at your slab.
The rules
How leave encashment and its tax exemption are calculated
Leave encashment is the cash your employer pays for earned or privilege leave you have not used. It is worked out from your Basic salary plus Dearness Allowance only. Casual and sick leave are usually not encashable.
The four-limit test for private employees
When you retire or resign, the tax-free part is the lowest of these four amounts:
- The leave encashment you actually receive.
- 10 times your average monthly Basic + DA over the last 10 months.
- The cash value of leave at credit, counting at most 30 days for each completed year of service, minus leave already taken or encashed.
- ₹25,00,000, reduced by any exemption you claimed at earlier employers.
Anything above the lowest limit is added to your salary and taxed at your slab rate. Government employees get the full amount tax-free at retirement.
Check your total tax with our income tax calculator.
Leave encashment formula
Payout:
Leave encashment = (Basic + DA) ÷ 30 × leave daysLeave counted for the tax limit:
Leave at credit = (min(leave per year, 30) × years) − leave takenExample: ₹75,000 Basic + DA, 150 days
- Payout (₹2,500 × 150)
- ₹3,75,000
- 10 months’ average salary
- ₹7,50,000
- Leave at credit (300 − 200 = 100 days)
- ₹2,50,000
- Lifetime limit
- ₹25,00,000
- Tax-free (lowest)
- ₹2,50,000
Know before you exit
Leave encashment tax rules in India
- During service: fully taxable
- Leave you encash while still employed is taxed as salary. You may reduce the tax through Section 89 relief if it pushes you into a higher slab.
- Private employees at exit
- On retirement or resignation, the lowest of the four limits is tax-free, with a lifetime cap of ₹25 lakh across all employers.
- Government employees
- Central and state government employees get their entire leave encashment tax-free at retirement.
- Paid after death
- Leave encashment paid to the family or legal heirs after an employee’s death is not taxable.
- Both tax regimes
- The exemption at retirement or resignation is available under both the old and the new tax regime.
- Labour codes
- The new labour codes let workers carry forward earned leave, up to a limit, and encash unused leave. Your employer’s policy decides the exact rules.
See the official rules on the Income Tax Department website. Leaving your job? Also check your gratuity.
Answers
Leave encashment calculator FAQs
How is leave encashment calculated?
Divide your monthly Basic + DA by 30 to get a daily rate, then multiply it by the number of unused earned leave days. For example, with Basic + DA of ₹60,000 and 45 days of leave, the payout is ₹60,000 ÷ 30 × 45 = ₹90,000. Some employers divide by 26 instead.
Is leave encashment taxable?
It depends on when you receive it. Leave encashed while you are still working is fully taxable. At retirement or resignation, private employees get an exemption up to the lowest of four limits, with a ₹25 lakh lifetime cap, and government employees get it fully tax-free.
What is the tax exemption limit for leave encashment?
For private sector employees the limit is ₹25 lakh over your lifetime, raised from ₹3 lakh from 1 April 2023. The actual exemption is the lowest of that limit, the amount received, 10 months of average salary, and the value of leave at credit counted at 30 days per year of service.
Is leave encashment on resignation tax-free?
It can be, fully or partly. Leave encashment received on resignation gets the same Section 10(10AA) exemption as at retirement, based on the four-limit test.
Which salary is used for leave encashment?
Only Basic salary and Dearness Allowance, plus any commission paid as a fixed percentage of turnover for the 10-month average. HRA, special allowance, bonus and other allowances are not included.
Why does my employer divide by 26 instead of 30?
Some employers count only working days and leave out Sundays, so they divide by 26. This gives a higher daily rate. Your leave policy or appointment letter will say which method applies.
Is the ₹25 lakh exemption available in the new tax regime?
Yes. The leave encashment exemption on retirement or resignation is available under both the old and the new tax regime.
Is leave encashment paid after death taxable?
No. Leave encashment paid to the family or legal heirs of an employee who has died is not taxable.
Can I encash sick or casual leave?
Usually not. Normally only earned or privilege leave can be encashed. Some employers allow other leave types under their own policy, but the law does not require it.
Know what your leave is really worth
Use the leave encashment calculator before you resign or retire, so you know your payout, the tax-free part and the tax to expect.
Calculate my leave encashmentThis calculator gives estimates for general information and is not tax advice. Your employer’s leave policy and your full income decide the final amounts. Speak to a tax professional for your situation.